This mother has 1,200 branches, 80,000 employees and more than sixteen million clients. And it rakes in the cash. Net profits of about $1 billion a month. No wonder its stock has risen about 60% in the past three years.

But wait. What if a 2008 happened again? What if the housing market collapsed and zombie moisters defaulted en masse on their loft mortgages, going to live under bridges or at mom’s? What if equity markets globally crumbled because of a trade war, protectionism, populism defeating globalism and an unprecedented mountain of debt collapsing on consumers and economies? Plus the orange guy.

Could a bank like the Royal fail? If we all got scared and swarmed to take our money out, could it survive? After all, it may have assets of $1.2 trillion, but the bulk of those are in the form of deposits from ordinary schmucks and businesses. They can be gone in days, or hours. Could it withstand a storm?

Some people say it’s impossible, and point to the fact Ottawa had to buy out entire bank mortgage portfolios a decade ago as evidence of bank fragility.It’s also a common belief that a bank-in-trouble means serious grief for anyone with money there. “The funds on deposit are no longer the property of the depositor,” says an ‘investment’ company flogging gold bullion. “Instead the depositor becomes an unsecured creditor or lender to the bank. Banks pay you interest, but their real purpose is to use your funds to earn a spread. They put your funds at risk in the global markets through lending, syndication and trading.”

All this becomes more relevant in a few days when the first “bail-in bonds” go on sale to investors, issued by (of course) the Royal Bank.

What’s a bail-in?

The opposite of a bail-out. Unlike what Washington did after the 2008 meltdown on Wall Street – shoveling boatloads of taxpayer money into banks to keep them alive and save the financial system – a bail-in means a failing bank would be rescued by its own investors. Bailing-in got a bad rap after depositors in Cyprus-based banks were forced to hand over their cash when those institutions wobbled. So all the financial loonies and charlatans among us (there are many) say the bail-in legislation first proposed by Harper then passed by Trudeau would end up stealing your cash, wiping out your bank preferred shares, or trashing your ETF owning bank debt.

Of course, this is crap.

True, Ottawa has designated six banks as Too Big To Fail. They’re called ‘systemically important,’ which means if one of them chokes, we’re all pooched. It’s also true that federal regulators (CDIC, the deposit insurance agency, and OSFI, the bank cop) now have the authority to actually take control of a bank if they see fit, for as long as five years. And in doing so, yes, they can order that certain securities and assets be turned into bank shares, raising cash to help rescue (maybe) the institution.

The powers Ottawa has assumed are incredibly broad. Effective this coming Sunday, the government has the legislated authority to take over any of the Big Six, kick out the board of directors, sell off assets or divisions, actually seize control of all the shares, rendering them worthless, or dilute them by converting assets into stock. Wow.

But here’s a key point that CDIC makes: “The bail-in power will not be retroactive. This means that only instruments that are issued, or amended to increase their principal value or extend their term to maturity, on or after September 23, 2018 will be eligible for bail-in conversion. The bail-in power will not apply to existing instruments…”

Therefore this statement, by the gold-humpers, is complete fiction: “Those at risk of a bail-in in the event of a failure are subordinated debt holders, bondholders, preferred shareholders and any accounts in excess of $100,000 not covered by CDIC insurance. Their bonds, preferred shares, deposits etc. would be converted to capital to re-capitalize the banks.”

And this brings us back to RBC, now first out of the gate with its shiny new Bail-In Bonds. It’s part of the global effort to ensure another 2008 doesn’t happen or, if it does, to try and save the system and not hollow out taxpayers. These bail-in securities will, by definition, be riskier than regular garden-variety bank debt because they can be converted into (worthless) equity in an emergency. So for that reason they will offer a premium return – yet to be spelled out.

Garth, would you expect such products to (eventually) become part of some plain vanilla bond ETFs, or would the interest rate premium suggest they will be included in more specialized products (high yield ETF or, perhaps, a product unto itself)? Presumably, for the short term, these will only be available by buying the bond directly? Thanks for the blog – years ago I took your advice to add more preferreds to my portfolio. These look like another worthwhile way to add some additional diversification and yield to the – balanced! – fixed income portion.

How exactly does this help the banks raise cash in a liquidity crunch? As I understand it, this simply allows the banks to use convert a bond (creditor) to equity BUT the money from the bond was already lent out so there is no new cash coming in. It only makes it so the bond doesn’t have to be repaid which may not be for an extended period as is. Maybe once these are laddered it helps?

I don’t know what is worse – no Nafta or modified to the Don’s approval. I believe giving up our sovereignty is a nonstarter. I don’t want to be a national colony and I think Albertans have a lot to complain about. Nimby drives me crazy. We could have advanced as a nation. Now I think it is more important to take of our regional differences. If Quebec leaves Confederation, it clears the path the path for Alberta to do the same. I am not for provoking but then I see my money going down a sinkhole to preserve “cultures”. Prove me wrong.

My mother had a brother who lived on a reservation near Pitt Meadows. This was after her divorce (it was hard on me). She took our brood to visit him a few times. I was afraid of him as I had never seen anybody so dark. His wife had left him with 3 kids and as far I was concerned, he was poisoning with hate. I played with his kids and all they were sexually active which they thought was nirvana. They thought I was strange which I am and probably right yet I wonder where they would be with strong moral leadership. My parents delivered in spades.

In reflection, I think my mother was trying to teach me that sucking tit is a dead end. She drove that point home if I am right.

I looked at cannabis stocks back in January this year and judged them to be unworthy based on cash flow. It is a reminder that the world doesn’t care what I think. My thinking needs work – again.

Also, this may be negative for bank profits short term. Bond holders are currently demanding the spread from a triple A rated security (bank credit rating) and now should get some premium for this risk. even 20 bps could be a big increase in funding costs for the bank profits as NIMs are currently in the 200 bps range?

Garth they are going to come at +15 to current deposit notes. so approximately +100 to the canadian 5yr bond or a yield of 3.30/3.35……me thinks there are better areas for the retail world to put their money

and as per bailing out banks when the BoC were buying the Bank secured mortgage portfolios to give the Bank liquidity…..that program was one of the most successful programs the BoC or our government has run…buying secured mortgages that hadn’t been pooled yet at Canada’s +100bps that were guaranteed to begin with to then immediately issue Canadian Bonds…I could look it up but that program made the tax payers a lot of money

#11 funny bone on 09.20.18 at 4:27 pm
and as per bailing out banks when the BoC were buying the Bank secured mortgage portfolios to give the Bank liquidity…..that program was one of the most successful programs the BoC or our government has run…buying secured mortgages that hadn’t been pooled yet at Canada’s +100bps that were guaranteed to begin with to then immediately issue Canadian Bonds…I could look it up but that program made the tax payers a lot of money

It’s funny, you attack the gold guys but you yourself are doing the exact same thing but just on the other side of things. Both selling a service/ product and both sides are totally bias simply because of the product/service you sell. How about some honesty….

Seems to me that the bail-in bonds will provide a growth opportunity for investors who understand that these financial instruments come with an increased risk. Same as anyone looking to purchase high risk/high yield financial instruments today. The difference is that thus far Canadian banks have consistently provided a good ROI & I can’t help but believe the regulatory checks & balances in place will ensure those ‘risky’ bonds are less risky than most. Question is, will the ROI be worth the increased risk, or will other instruments on offer provide just as good a return w/o increased risk?

Global News has reported that Sen. Campbell has collected more than $800,000 in cash compensation and about $2.1 million worth of shares as a board director of the company that owns the troubled River Rock Casino, Great Canadian Gaming.

Campbell also is chair of the Great Canadian Gaming committee responsible for overseeing company compliance and ethics, and whether surveillance and security at River Rock Casino is adequate.

When asked about the money laudering debacle there, his response was: “I have no idea what you’re talking about.”

Stan Brooks is exactly right. When you get a mortgage the money is created by keystroke and given to you. It then becomes your liability and the loan is the banks asset. Actual deposits are liabilities from the bank’s perspective. Deposits in our fractional reserve abused system are so small as to be not worth mentioning. Canadian banks are a great fair weather business. In 2008 our banks all had to be bailed out and Canada had zero housing and mortgage issues. But don’t worry your pretty heads. No doubt our sunny ways leader is on top of this .

Not that anyone will change their view one way or the other but here is how Royal Bank of Canada’s balance sheet looked at the end of its last fiscal year.

Royal Bank Balance Sheet: (Updated Q4, 2017) The composition of assets is as follows: 45% are loans (of which 71% are categorized as retail and 29% as wholesale), 18% are assets purchased under reverse repurchase agreements and securities borrowed (short term investments), 18% are securities (58% of which are held for trading and 42% are held for investment, 8% derivatives (which appear to be mainly for risk management purposes), 4% “other” – which is mostly financial receivables and 5% cash and deposits with other banks, and just 1% goodwill.

Liabilities consist of 65% deposits (of which 33% are personal, 64% are business and government and 3% are from other banks), 8% derivatives, 12% obligations for assets sold under repurchase agreements (essentially short-term borrowing), 2.5% obligations related to securities sold short, 4% “other” – which is mostly financial payables of various kinds, 5% common equity, 1% subordinated debt and 0.5% preferred shares. In general the balance sheet shows some complexity in that loans are only 45% of assets. Common equity at about 5% is very highly leveraged which is typical of banks.

But there are a lot of banks outside of the big 6 that have a lot of bodies buried.

And no regulatory authorities, including the OSFI who consistently fail at doing their job and enforcing anything in Canada, have any idea what is going on inside of these institutions and must trust what they are told.

It is a unspoken constitutional right to have the curtain remained closed when doing business in Canada.

You can always write-off the capital loss but the Credit unions in British Columbia will be the first ones to vanish. Whether or not the people with money on deposit will get lucky and insurance will cover them is another story. Why would anyone buy bail-in bonds when they can buy Israel bonds? They also pay a higher return and in theory Israel is safer than money in Canada.

I agree Royal Bank is extremely unlikely to ever need to use the Bail In

At the risk of incurring wrath, I would point out that deposits form no part of the assets but rather deposits fund a large part of the assets (deposits fund 65% of the assets in the case of royal Bank). The assets are loans, repurchase agreements that are loans in substance, securities, and a bit of derivatives and 5% “cash” which is likely mostly deposits at the central bank.

In the unlikely event of big loan defaults not covered by CMHC the bank’s common equity which is thin at 5% could be depleted. Unlikely but not impossible.

I too would be comfortable investing in bail-in bonds if I were in the market for bonds.

You just buy 10 year Israel bonds and then wait for the worldwide financial system to implode and make a huge capital gain when negative interest rates become commonplace in every country around the world.

Bank health depends on borrowers being able to pay interest and principle as due monthly.

And the ability of many borrowers to make those payments would crumble if the banks turned off the taps to new loans.

It all seems to work great but it is a finely tuned system. The system probably has to be kept in motion running at all times.

Any massive lack of confidence in the system would be a disaster. Garth alludes to this when he says bank deposits could flee. Indeed they could although basically they can probably only flee to other banks. Never ever will we see a bank run involving people taking out paper cash. Home Capital’s high interest savings accounts deposits went out probably nearly 100% to other banks.

Luckily most people have great confidence in the banking system. Only a tiny percentage of people lack confidence in the banks.

Environics wealthscapes reports an update on the financial health of Canadians across the country. Very positive and supports why the housing market is not crashing in the GTA, dispite higher interest rates, B20, and unfair housing plan. Heres some highlights:

So much for no bail in. What I think will be the real shock to the people of the world is when they collectively find out all at the same time that banking is a scam bigger than global warming what with banks able to create money out of nothing and charge interest on the new freshly digitized money. Hence RBC making a billion a month.

“Remind me here: Why do we need banks in first place if they bear no risk for their actions?”

“Peer to peer lending platform with strict lending rules will do the same job with much less expenses.”
———————————————–
How will new $’s be created if it came down to only you, lending me $, to by my next house?

Central banks “officially” target inflation of 2-3%, but most know it higher by design, as it of course needs to be. How else will debts be reduced proportionally in relation to asset values.

Royal Bank of Canada is the country’s largest bank with assets of $1.2 trillion, 1376 bank branches and 78,210 employees.

Earnings by segment are 48% from personal and commercial banking (in Canada, the U.S. and the Caribbean) , 20% from capital markets (includes equity and debt origination and distribution, and structuring and trading), 17% from wealth management (mainly Canada, the U.S., the U.K, the channel islands and Asia), 9% from insurance (In Canada and reinsurance outside Canada), and 5% from investor and treasury service.

Assets are allocated 35% and equity 31% to personal and commercial banking, Wealth management allocation of assets is 7% and equity 21%, just 1% of assets in insurance (which seems too low) and 3% of equity, 12% of assets in investor and treasury services (which includes acting as custodian for many external mutual funds) and 55% of equity, 42% of assets in capital markets (which seems very high) and 29% of equity and 3% of assets in corporate services but 12% of equity.

The return on equity for personal and commercial banking is reported at a stunningly profitable 28% and was similar in the prior two years (The high ROE is presumably due to massive leverage on CMHC mortgages), 13% ROE for wealth management, 42% ROE for insurance (which seems extraordinarily high but might be explained by selling high margin insurance like life insurance on mortgages and by reinsurance which will likely occasionally have losses, 23% for investor and treasury services, and 13% ROE in capital markets.

Canada accounts for 61% of revenue, The U.S. accounts for 23% of revenue, International (37 countries) accounts for 17% of revenue. 58% of revenue is from non-interest income (investment management fees, account service charges, foreign exchange fees and card fees, insurance, underwriting and trading) and 42% from net interest income. The average net interest margin on earning assets is only 1.72%.

There is $5.5 trillion in assets under administration (Which mainly consists of assets in external mutual funds that they act as custodian for but also includes securitised mortgages and credit card receivables) but only $ 0.6 trillion in assets under management.

If a b lender fails, (think HCG) their assets can be sold, because they are still reasonably good quality.

Unlike the NINJA loans they had in the states, those were in the ” junk” category credit risk. Meaning high chance of default, and you don’t get your money back.

#44We Saw the Early Notices Warning about Big Jumps in Assessed BC Values on 09.20.18 at 6:13 pm

Christy signed off on this as part of the media strategy to pump the real estate agenda.

Now we can’t help but think: will BC Assessment be sending out warning letters about the 23% drop in price in lower mainland house values this year, which will come as a shock to most?

My money is on the cover-up to paper over any loss and fraudulently keep assessed values flat to ensure the tax collection stays fat.

The true letter should say: warning, we screwed up assessing values based on unknown money sources and major fraud at all levels in BC. We are sorry you overpaid and trusted regulators to protect the validity of housing. Your house is no longer worth anything near we originally thought it was a few years back. Sorry for the inconvenience and make sure to pay your taxes on time. Thank you.

Prime Minister Justin Trudeau has tasked newly appointed minister Bill Blair with curbing money laundering in British Columbia and other provinces as part of the federal government’s fight against organized crime.

“We know that the same people who arranged for money to be laundered in casinos were buying real estate.”

We do?

Looking forward to the amount being tallied up for the report on dirty BC real estate.

…”Thanks to a gigantic money-laundering news story, which this week brought down the head of Danske bank, we can get a sense of just how much money has been pouring out of the former Soviet Union, including cash belonging to the Kremlin elite. And it has all been happening because Britain has refused to help stop it.

The sheer volume of the cash that passed through Danske Bank’s Estonian subsidiary – €200bn – in the eight years to 2015 is overwhelming, but that is just a fraction of the sum that left the ex-USSR and headed west. Investigators estimate the deposits in Danske Bank may have been just 5% of the total held in “non-resident” accounts in the Baltic states. If the money flows in other banks were in proportion to those at Danske, as much as €4tr could have transited the three small republics – sufficient to pay off the British national debt, buy Apple, and stage the Olympics and the World Cup, with enough left over to make you the richest person alive.

Lying in corporate documents is illegal, but enforcement is nonexistent

Danske bank has been rightly lambasted for its lax checks on the provenance of the money in so-called “non-resident” accounts, and may face costly legal action from the United States, but Britain needs to look at its role too. Without us, the ex-Soviet owners of this dark money would have found it far harder to hide.
Business Today: sign up for a morning shot of financial news
Read more

The owners of these suspicious accounts repeatedly obscured their identity behind Limited Liability Partnerships (LLPs), a British corporate structure created two decades ago. A whistleblower who exposed what was happening in Estonia wrote to bank management in 2013

Talk about failing.
Seems there will be more developments approved on paper with Municipalities with or without cranes up are planning to fail.
Why not!
Condo prices keep going up. So give back deposits to those who trusted the developers with their money.
Come back later under other sheep clothes and sell again at a much higher price.
Tridel latest new tower in Etobicoke ( at least 3 already under construction )…prices are at highest ever.
$600,000 for 800 square feet
$860,000 for 1,100 square feet.

If you were a developer…..why would you not declare bankruptcy or some other false fact and quit development…to come back.

So if 40-60% of Canadians are involved in real estate (Yeah i’d say its that high. drive through any Tims and watch the cars and trucks with real estate – type signs and one gets the sense that far more people are “in” than those who are “out” of real estate.

What about the explosion in government salaries from quadrupling of property taxes this decade,

What happens when the revenue from this pigfest disappears as assessments plummet and tax revenue from it dissolves.

Does government still pay the secretary a 100K including pension, MERC’s, salary, etc

Or do they layoff 30% of the public sector as rating agencies rip their ratings apart? Further servicing their trillions in sovereign explodes with 8% interest rates??

Most G 7 or Western Countries don’t want another Depression ala 1920’s…..which BTW was purposely created by Banks and Stock Markets. (ALL WARS ARE BANKERS WARS).

We simply MOOOOOVE the “Fractional Reserve” decimal point a few M-O-R-E points to the right and keep the banks liquid, if not on perma -profit. (Nobody talks about junk bonds, derivatives etc. anymore hmmmmm).

Garth,
Perhaps one day “bank supply management” in Canada will go the way of the dodo bird as in dairy and poultry supply management.
Not to mention airlines, insurance, medical services etc.
Now we would be talking true global trade.
…..except in Canada eh.
However we all do enjoy the protected returns – especially the American profits of our Canadian banks.
Surely Lighthizer et al have got all that in their sights.
Profit is in protectionism.
…..the Canadian way.
And the EU, Britain, USA, China
and the rest of the protectionist world.
….not including oil. I guess.

I don’t see any of the major banks failing unless there is a prolonged period of deflation, which we haven’t seen since the 30’s. Sure 2008 saw some pretty major corrections and wiped out a lot of paper equity, but it wasn’t something printing up a few hundred trillion couldn’t fix. As long as there is ink in the printer there will be no long term deflation.

Also, Canadian banks are in a pretty good position, even in the case of a large housing correction. They are pretty careful to keep the uninsured lending below 80% of the appraised value so they wouldn’t even start losing money until prices drop that far. Plus many of the mortgages are insured. I’d be more concerned about their commercial portfolios. But most big corporations don’t just “take out a mortgage”, they sell bonds. Even the little real estate company I used to own shares in did this. One of their major lenders was a pension fund, not a bank. They had bank loans too, but that was from a period where they weren’t big enough yet to attract funds.

#44, a rise or drop in the appraised value of a house does not change the annual income taxes. The have a fudge factor called the “mill rate” which is adjusted to ensure the desired tax rate is achieved. The whole appraisal process is designed to achieve a “fair” relative tax rate, so that a house appraised at $1,000,000 pays say 10 times more than a house appraised at $100,000. But if the city needs $110,000 in revenue they just set the mill rate at 10%. (I don’t think any cities charge 10%, 4% is probably more like it, but I’m using simple numbers so people don’t have to crack out the calculator.)

I’m not even sure this whole appraisal thing can be called “fair”. Why should a person with a $1,000,000 house pay 10 times as much as a person with a $100,000 house? Do they use the roads 10 times more? Do they have 10 times as many kids in school? Do they flush the toilet 10 times as often? If they use 10 times more electricity or water that’s metered so they pay for it already. But this is how “fairness” is understood in our society; “make the rich pay more”. Everyone keeps talking about socialism but the fact is we already have it. The “rich” pay 80% of the taxes. The only part of socialism we don’t have is where the government gives money to the “poor”. Oh wait, the do, it’s called welfare or EI. Our country is very socialist already we just don’t like to see it that way.

Property taxes should be seen for what they are, a form of wealth tax. They are an outright tax on for what people is their largest capital asset, their house. You’ve got to keep paying that 4% whether you have an income or not. But they are partially avoidable, you can always buy a smaller house.

The insidious thing about property taxes when viewed as a wealth tax is that you have to pay on the whole appraised value of the house even if you have a mortgage and don’t own the whole house. The counter argument is of course whether you own it outright or not you still use the same city services. But that argument runs counter to the idea that houses should be taxed on appraised value. But I guess they’ve got to do it somehow. If they used a flat tax of say $4,000 per house it would be more of a “pole tax” and that isn’t very socialist. In a socialist society the tax burden is placed disproportionately on the rich. That is what we do in Canada, and it runs through everything from the income tax code to property taxes to capital gains to the HST. If you’ve got money, you pay not only more taxes, but at a higher rate. If you’ve got no money they leave you alone.

But in the end of the day we all pay the taxes, because they must be added into the price charged for goods and services. Turdeau can raise the taxes on doctors all he likes, the doctors will just charge more. Since a large part of what doctors get paid is paid by the government, they will just have to raise taxes on everyone else. They get nowhere. But this is how socialism works.

Ever wonder why the shop rate when you get your clunker fixed is $140 an hour but the mechanic only gets paid $30 and hour? Some of it is the building and tools for sure. Let’s add another $30 an hour for that. There is power, heat, water and sewer too. Let’s add $10 an hour for those. So why is it that it costs $140 an hour instead of $70? Taxes. So it doesn’t matter that you only make the new minimum wage of $14 an hour and drive a clunker, because of the way our economic system concentrates taxes in certain locations you still pay 50% tax. You just give the money to Canadian Tire first and then the government hits them with the bill.

So remember all you socialists out there, when the government raises taxes on the rich, they raise taxes on everybody, even if you don’t have to send it to them directly. Prices for everything have to rise. The taxes must be paid from the price paid. There is nowhere else for the money to come from.

Lots of people making money and using banks are happy the way they are.

So I don’t see any outrage at all.

You have employees, depositors, investors, home buyers, business owners, shareholders and so on.

Banks are in the game to make money, that’s how capitalism functions. Our banks are pretty damn stable compared to the others. That’s why I don’t think anyone is upset at how banks make money, other than a few on this forum.

What ‘storm’ exactly is it with your critical thinking that you think is coming??

It has been outlined day after day on this blog and the comments that being prudently invested is a great long term strategy.

The comment section on this blog thinks real-estate will crash. What planet are you on? Its all psychology. People have gotten used to house that cost 5 hundred, 6 hundred, 7 hundred k and more. They are OK with it.

There is no ‘storm’ coming. Sure there might be a few years of slower growth, and sure RE might stabilize or even drop a few percent but there is no storm on the horizon in any of these areas (stocks, RE).

You doomsayers wandering around saying the bubble is going to pop have been saying that for more than a decade. How much opportunity have you missed?

Have you ever tried looking through a lens of possibility instead of negativity? Its awesome.

So, RBC is too big to fail. So why buy a product which bails them out using your dough when they fail? Meaning, they’re not too big to fail? Welcome to new speak. Wait until they bundle this treat with other stuff. Stash a little in this ETF and that little ETF. Hey, it’s Canada. It’ll make a good wrapper for the reefer madness; its all in the smoke and mirrors… geeeshhh, eh!

When 2008 happened everyone made sure they were ” to big to fail ” A lot of governments printed money like crazy. All economics models went out the window that year. Rich survived with minor wounds. All vested parties played the theme ” it will be the great recession” . No one knows what would happen if they didn’t get bail outs. Bailouts assured the banks everywhere its ok to get bigger and screw up with little consequences. I think we should have hit the re set button that year but privileged people thought otherwise.

Success on Canada’s part in the NAFTA negotiations is a certainty. I know what the strategy is and Trump’s negotiation team will cave and concede.

Chrystia Freeland is a highly educated and capable person. Unfortunately, she was handed an unfortunate voice. Absolutely painful to listen to. Grating. I was listening to an interview with her on CBC a couple of months ago and had to turn it off after a couple of minutes. Not her fault.

The powers Ottawa has assumed are incredibly broad. Effective this coming Sunday, the government has the legislated authority to take over any of the Big Six, kick out the board of directors, sell off assets or divisions, actually seize control of all the shares, rendering them worthless, or dilute them by converting assets into stock. Wow.

Since Garth is eagerly awaiting my retirement, I subscribe to daily updates from a couple of retirement planning websites. In one of today’s offering a supposed commentator was commenting on a survey of retired Canadians attitudes toward downsizing RE assets. Apparently you are wary of the financial, family and social costs of such a risky strategy.

What the commentator didn’t comment on wa that the study was commissioned by Home Equity Bank. Yep, the same people who want you to stay in your home and trade half of your equity for something that they probably aren’t allowed to call an annuity.

The survey company seems to delivered exactly what they were paid for.

During the GFC the Bank of Canada bought at face value the mortgages of the banks something like 100B$ plus from each bank underwater and just kept them on their books on the condition that until the banks were sound they were not allowed to increase their dividends.

What happens is the real estate value can sink so much as to deplete homeowner equity forcing the banks to write off loans if owners stop paying which can be a long process.

Are the banks reserves adequate? Here is an expert.

“Q: What about Canada?

A: One of the potential issues with the Canadian banks is that the risk weights that are given to mortgages are exceptionally low and that’s because there have been no losses in Canada for 25, 30 years. So for example, if you look at the larger Canadian banks, you’ll see that they assume the risk rates are in the single digits — and to get to that number they assume 85 per cent of the mortgages that they have that are not government-guaranteed will produce losses of 20 basis points or less per year.”https://www.zerohedge.com/news/2018-09-16/big-shorts-steve-eisman-greenspan-will-go-down-history-worst-fed-chairman

Now all the banks have been stress tested and according to the government they should survive. The question is how damaged will the market will penalize them if this happens.
Depends on how long and severe the housing correction lasts.

enjoy reading your good blog.

#72unknown money sources and major fraud at all levels in BC. on 09.20.18 at 9:47 pm

“The true letter should say: warning, we screwed up assessing values based on unknown money sources and major fraud at all levels in BC. We are sorry you overpaid and trusted regulators to protect the validity of housing. Your house is no longer worth anything near we originally thought it was a few years back. Sorry for the inconvenience and make sure to pay your taxes on time. Thank you.”

The comment from above is the BEST summation of our lovely real estate bubble. Being one of the most expensive parts of Canada to begin with pre-bubble, it must have given these unknown money sources and corruption on all levels in B.C. lots of room to play during its inflation.

It was all a big fat lie sold to its vain, gullible annoyingly pompous denizens. Each time suitcases of money in need of sanitation sloshed into the real estate market they cheered, rather then wondered where all this money was coming from. Death by flattery.

Now that the market has turned, the political capital lies in finding the perpetrators, while during the bubble it was in turning a blind eye.

In the meantime, a generation of aspiring home owners were either consumed by the bubble through enormous mortgages, or continued to rent, while the communities were whored to the highest bidder. Pretty cool

‘Jim’ – all too true about how many Americans are driven to bankruptcy if they or a family member has a serious illness. Add in the fact that declaring bankruptcy DOES NOT wipe out any medical/hospital related debt. The law was amended a number of years ago (under the Bush administration as I recall) to prevent people from being able to wipe out that type of debt by declaring bankruptcy. You might be broke, but you are still liable for any hospital or medical debt you incurred.
____________________________________

“In bankruptcy, medical bills are considered general unsecured debts just like your credit cards. This means that medical bills don’t receive priority treatment and can easily be wiped out by filing for bankruptcy.”

“But wait. What if a 2008 happened again? What if the housing market collapsed and zombie moisters defaulted en masse on their loft mortgages, going to live under bridges or at mom’s? What if equity markets globally crumbled because of a trade war, protectionism, populism defeating globalism and an unprecedented mountain of debt collapsing on consumers and economies? Plus the orange guy”

The first though I had when I read this is Australia and the housing cliff they just fell off. Less nine months and the average loss is approx $200K. A young soon to be bride stated that she and hubby would continue to rent until the market hits bottom and then buy. Google The Guardian Australia housing bubble. No ones really knows where the bottom will be, but they is the expectation that it is significantly lower. And those interest only loans are becoming problematic as interest rates rise in Australia. I watched 60 minutes on Australia and then featured a family over indebted and all were working to pitch in as the rates rise and they can’t keep up with the payments on a million dollar home. The older dad (kids – working age) said he couldn’t enjoy the million dollar home. All he thinks about is the ball and chain house that won’t sell and is now set to increase in payments and decrease in value. Sad to watch…I hope he gets out. The mortgage prison…not my words.

But in Canada we are truly special. Interest rates will NOT rise because we live in the Northern Hemisphere and our government is like way more responsible and caring and would Never let that happen.

Couldnt a bank deposit be considered a new instrument if that account was opened after the rules come into play. As a depositor your are lending your money to the bank and have to assume some risk. I don’t think the average person understands how banking and credit creation works. The Canadian banks will be tested one day and I’m glad it will be investors and depositors on the hook and not tax payers. At least that is the goal.

More for Kate #152 yesterday…..the US government has access to all you Visa card statements and monitors you for marijuana purchases. It pops up with your profile….so don’t even bother lying if you’ve bought pot with plastic. Trudeau screwed you by not telling you the consequences of his actions. You’re screwed if you have anything to do with pot…..yeah…even the lowly contract jsnitor who sweeps out the office of a business supplying electrical wiring to a pot company is related…..and banned……never take the kids to Disneyland…..what a shame. Thx for voting Liberal potheads…..you’re stuck in a welfare state making crap wages forever. Me ….I like those six month winter’s on Maui….
Soulful…….the Dents on S Kihei Rd over looking the surgery…..sublime.

Well if you’re afraid of banks failing a person could always just invest in cryptos.

The perfect investment.

Bail in, bail what? What if the exchange fails? Who makes the shareholders and the depositors whole again? Answer: no one. If the exchange fails everyone loses everything. No worries no problem. No shareholders to make whole. No one in their right mind would buy shares in a crypto exchange anyway. What do you do if your exchange fails and you lose everything? Easy. Just invent your own crypto and keeep going. Like owning a money printing press. Choose a cool name for it and it’ll be worth more.

What if your exchange gets hacked? Easy! Again, you just lose everything. Yay. Will the exchange make you whole again? Hell no. The exchange doesn’t even exist in real life. It has no geographical location. Call the police, my cryptos got hacked? Sure, and send them where? Some lanky pimple faced teen’s basement in Illinois who’s spoofing his IP address to look like it’s in the Caribbean? Is he regulated? Well his mom just gave him a curfew. So I guess that’s kind of like regulation.

What if you want to sell your cryptos? Surprise. You can’t. Why? Why would anyone in their right mind who is creating fake money out of thin air on a computer screen and selling it to dummies like you for real cash, allow you to take that cash back again? No you can’t have your money back. You can just watch as the value of the crypto (that you can’t sell) goes up and up as the creators restrict supply and keep selling it to people like you.

opening words…loose up to 45% of house value 2/5ths in less than a year. This is actually quite surreal to watch…after what the World had already experienced via Ireland, Spain, US etc. They are also saying this will tank the economy.

OK, what I was telling my people three months ago is finally making it into the media. I think the numbers are fudged and subject to a downward revision, but even so…the idea that Canadian GDP will be cut by a third under Trudeaus final attack on Canada mean very bad things for your portfolio….including bonds, because they fall when the dollar falls. The only way Moroneau can ride to the rescue is to do what Turkey and Argentina have done…..double digit rate hikes and devalue the paper.

The NAFTA collapse will exacerbate the slide but not be the only issue to cause Canada to slide into recession, possibly by Xmas, definatley Q1 ’20. With the continued failure of government a cascading effect will likely drag 10% off the TSX by December.

The fall is already happening , many companies are selling up in Canada and taking the loss, meaning they’ll never coming back. AltaGas is a recent example, SME o/g in the hundreds going south… Thompson Reuters, Agrium, Trinidad Drilling…..small medium and large disappearing under Trud the Conquerer…start counting the Canadian jobs going south every day…..it’s ugly. CBC says new pot jobs are going to disrupt……yeah…..riiiiiighhhhttttt . Don’t ring the cash drawer at Royal Bank, they’re a majority US centric bank now reporting in USD….ergo US jobs, Canadian lay offs.

Kids, this is a good time to play defense…but American cash. Canadian denominated bonds , prefs and cash will be taken down 10% and possibly more as the ” Cascade Effect” drags everything into Gropers Grove.

What ‘storm’ exactly is it with your critical thinking that you think is coming??

—————————————

Inflation in basic necessities, without ability to compensate fixed incomes and without increases in wages.

Go to the closest grocery store and tell me there is no rampant inflation. It is already here and accelerating.

Grocery store CEOs just told us that inflation is coming, despite increases in prices and product shrinkage that amounted to at least 10-15 % annually inflation for the last 2 years. Do you think they would bother warning you if the expected future price increase is 1.5 %?

There are times when it pays off to be ignorant, there are times when it kills you.

Are you really that dumb or just pretending?

=============================
People have gotten used to house that cost 5 hundred, 6 hundred, 7 hundred k and more. They are OK with it.

There is no ‘storm’ coming. Sure there might be a few years of slower growth, and sure RE might stabilize or even drop a few percent but there is no storm on the horizon in any of these areas (stocks, RE).

You doomsayers wandering around saying the bubble is going to pop have been saying that for more than a decade. How much opportunity have you missed?

It does not matter what people are conditioned to think how much a house is worth, it matter what they can pay for it in real value/money.

As for Canadian real estate, who really cares at this point? It is the biggest bubble ever, the biggest Ponzi scheme in history and will deflate no matter what you think or believe.

As for life being beautiful, tell that to every retiree out there and see what happens. And the real beauty?
You time to (not) retire is coming too.

It is interesting why a top tier bank would need capital at costs (maybe 5-6 %, maybe more, for sure above the preferred shares return) far above the interest rates on deposits (1%?). Why not just increase deposit rates or cut dividends if they need more capital (and what exactly do they need it for?)

As #60 SmokeRobinson on 09.20.18 at 8:10 pm tells us life is good, opportunities are all around, people are rich, real estate is solid and stable, will not drop, there is no inflation, there is plenty of savings, banks are well capitalized and doomsayers are … well, doomed.

So why would you pay more for something that you don’t need? Enlighten me here.

……………and they can pay very nice dividends too. Tax advantaged. I backed up the truck in 2016 when NA was at $44 and paying 5%. It is now at 65. I bought the big six in 09 when everyone was bailing and made out like a bandit. Buy the big six in the dips and hold. You will do very well. I am overweight the big six. No fear.

#46 Jungle on 09.20.18 at 6:19 pm
Credit unions run on a “not for profit ” business model, depending largely from deposits form customers in the community they serve.

They are less leveraged than chartered banks. They don’t have size and profits to take big risk.
—————
You gotta be kidden me.
VanCity is the mucho grande of CUs.
They grant mortgages with reckless abandon.

“Many of the mortgages were already insured and therefore, created no additional risk for the government,” the CBA noted in an email to CBC News. The CMHC estimates that by the time the program is wound up, it will have generated $2.5 billion in profit as those mortgages are paid off, the bankers’ group noted.

Calling the CCPA report “completely baseless,” Department of Finance spokesperson Chisholm Pothier noted that the mortgage program has already generated more than $1.2 billion in net revenues for the CMHC’s coffers.

you are at best an average fear mongering troll with some degree of a high school financial background

“Many of the mortgages were already insured and therefore, created no additional risk for the government,” the CBA noted in an email to CBC News. The CMHC estimates that by the time the program is wound up, it will have generated $2.5 billion in profit as those mortgages are paid off, the bankers’ group noted.

Calling the CCPA report “completely baseless,” Department of Finance spokesperson Chisholm Pothier noted that the mortgage program has already generated more than $1.2 billion in net revenues for the CMHC’s coffers.

you are at best an average fear mongering troll with some degree of a high school financial background

And you believe that crap sweetie? CBA represents the banks, what do you expect them to say?
Believing them is like believing realtors on the state of real estate in Canada? Always good time to buy, right?

Don’t get me started on CMHC, if their mortgage program was that good and profitable banks would have been doing it/the mortgage insurance themselves.

BTW you just acknowledged that a whole bunch of those mortgages underwritten by ‘the most prudent banks in the world with zero reserve requirements’ was pure crap and had to be rescued by CHMC. Then the government had to amend the mortgage rules – the infamous 0 down, 40 years ultra sub primes in order to make that crap look ‘well performing’ and keep interest at zero robbing savers and retirees while inflation rages up.

#37 Jungle on 09.20.18 at 5:58 pm
Environics wealthscapes reports an update on the financial health of Canadians across the country. Very positive and supports why the housing market is not crashing in the GTA, dispite higher interest rates, B20, and unfair housing plan. Heres some highlights:

Didn’t everyone that worked at Enron think it would never fail? same as Lehman, Fanny & Freddy? People in Greece and Venezuela probably didn’t think banks would fail either, or their government. Why would the bank be passing this bail-in stuff if they weren’t worried about failing? This is outrageous. A company that charges us to keep our money, gets miss managed by fat cats that collect interest on the money we give them, don’t do any useful work, then when it fails, we have to bail them out? how is that not criminal? oh wait, it is, that’s why Iceland threw a bunch of banksters in jail after ’08, same thing everyone else is doing. No wonder people are piling gold & silver up in there safes right next to their guns. This will be ugly when the banks start to topple. Greece was just the canary in the coal mine, any country with fractional reserve banking is headed the same direction. Only one way this can end, good old fiat currency
The bail-in framework is not the banks’ idea, but rather that of government regulators and central banks to ensure taxpayers are not on the hook if this situation occurs, which it won’t. – Garth

#88 Stan Brooks on 09.21.18 at 12:28 am
It is interesting why a top tier bank would need capital at costs (maybe 5-6 %, maybe more, for sure above the preferred shares return) far above the interest rates on deposits (1%?). Why not just increase deposit rates or cut dividends if they need more capital (and what exactly do they need it for?)
—————————————————————–

For a guy who pretends to know what he’s talking about you really have no clue. Talk yesterday was that RBC was trying to get these done at +10bps, but market was looking more for the 15-20bps area. So, no, not anywhere near 5 or 6%. Just like inflation isn’t at 8%.

But please, don’t listen to posters asking you to leave. Your idiocy is far too entertaining.

Garth, isn’t this also a way to reduce other increased capital requirements with the new ifrs 9 thing coming down, i.e. having to retest the mortgage portfolio throughout the life of the mortgage, not just at approval stage, etc? If rates and household debt keep rising (canadians unable to exert any self control on their spending), and house prices continue to tank the math looks like more foreclosures and everyday folk handing back the keys. This seems like a strategy to get the public to contribute to a rainy day fund just when the banks see storm clouds on the horizon.
I love their ingenuity. Seriously. I am proud of them.

MICHAEL HUDSON: Well, banks don’t invest. That’s a myth. The pretense is that rescuing the banks rescued the economy. But the banks don’t make loans to the economy. Banks don’t make loans to fund factories. They don’t make loans for infrastructure. They make loans to buy assets already in place. They’re privatizing the structure to take it private, raise the rates the people have to pay for services. Essentially they lend to raiders taking over corporations. They won’t help a corporation put in more equipment and hire more people, but they’ll lend to a raider to break up a corporation, downsize the labor force, smash it up and leave it a bankrupt shell. That’s the financial management plan. That’s what they teach in business schools.”

MICHAEL HUDSON: Well, banks don’t invest. That’s a myth. The pretense is that rescuing the banks rescued the economy. But the banks don’t make loans to the economy. Banks don’t make loans to fund factories. They don’t make loans for infrastructure. They make loans to buy assets already in place. They’re privatizing the structure to take it private, raise the rates the people have to pay for services. Essentially they lend to raiders taking over corporations. They won’t help a corporation put in more equipment and hire more people, but they’ll lend to a raider to break up a corporation, downsize the labor force, smash it up and leave it a bankrupt shell. That’s the financial management plan. That’s what they teach in business schools.

Contrary to the idea that bailing out the banks helps the economy, the fact is that the economy today cannot recover without a bank failure.

MARC STEINER: Let me stop you right there, before we go on. Let’s examine that before we have to close. So what do you mean by that? What do you mean, the economy cannot recover without a bank failure? What does that mean?

2 days ago – By Pam Martens and Russ Martens: September 19, 2018 ~ Citigroup Was Running the Above Dark Pools and Opaque Trading Venues in 2014 Last Friday, the Securit. … Last Friday, the Securities and Exchange Commission issued a 372-word press release that carried the title SEC Charges Citigroup for …
SEC: Citigroup Ran a Secret, Unregistered Stock Exchange for More ..

SEC Charges Citigroup for Dark Pool Misrepresentations
Citigroup and Affiliate Ordered to Pay More Than $12 Million in Disgorgement and Penalties

FOR IMMEDIATE RELEASE
2018-193

Washington D.C., Sept. 14, 2018 —

The Securities and Exchange Commission today entered an order finding that Citigroup Global Markets Inc. misled users of a dark pool operated by one of its affiliates.

The SEC’s order found that Citigroup misled users with assurances that high-frequency traders were not allowed to trade in Citi Match, a premium-priced dark pool operated by Citi Order Routing and Execution (CORE), when two of Citi Match’s most active users reasonably qualified as high-frequency traders and executed more than $9 billion of orders through the pool.

The SEC order also found that Citigroup failed to disclose that over a period of more than two years, close to half of Citi Match orders were routed to and executed in other trading venues, including other dark pools and exchanges, that did not offer the same premium features as Citi Match. Citigroup also sent trade confirmation messages to certain users that indicated their orders had been executed on Citi Match when in fact those orders had been executed on an outside venue.

The SEC also found that CORE failed to register as a national securities exchange in connection with its operation of Citi Match.

Re NAFTA, the Americans have telecommunications and banking on the table as industries they want to send to Canada to compete. Canada’s team is saying those two industries fall under the category of “culture”. The USA sees Canadian banks operating in the USA and thinks that the USA should be able to do the same in Canada.

That the Canadian banking system is part of Canadian culture sort of rings true because Canada takes a lot of pride in its banking system.

Is it possible that a big Canadian bank could fail if American banks are given free rein to open banks in Canada?

“The powers Ottawa has assumed are incredibly broad. Effective this coming Sunday, the government has the legislated authority to take over any of the Big Six, kick out the board of directors, sell off assets or divisions, actually seize control of all the shares, rendering them worthless, or dilute them by converting assets into stock”

Could this bail-in move be preparatory to opening up the Canadian banking system to American competition?

… that the Cdn government feels more secure about more competition in the Cdn banking industry, as long as the government has more power over potential bad outcomes?

all credit freezes free in all states
When you put a credit freeze on your account with the three credit bureaus, they can no longer release this report to third parties, and it becomes impossible to open a credit-card account or bank account in your name – impossible for you as well as identity thieves.

After you place credit freezes on your accounts and then want to open a new loan account or open an account with the Social Security administration (yes!), you need to first lift the credit freezes.

All this has now become a lot easier, faster, and as of September 21, free.

MICHAEL HUDSON: Well, banks don’t invest. That’s a myth. The pretense is that rescuing the banks rescued the economy. But the banks don’t make loans to the economy. Banks don’t make loans to fund factories. They don’t make loans for infrastructure. They make loans to buy assets already in place. They’re privatizing the structure to take it private, raise the rates the people have to pay for services. Essentially they lend to raiders taking over corporations. They won’t help a corporation put in more equipment and hire more people, but they’ll lend to a raider to break up a corporation, downsize the labor force, smash it up and leave it a bankrupt shell. That’s the financial management plan. That’s what they teach in business schools.”
—————————————————————-
This is pure nonsense. Banks lend to companies who are looking to expand productive capacity all the time. Whether they do it through loans, credit lines or asset backed facilities, it definitely happens. I’m guessing Hudson has never actually worked for a bank in a lending capacity.

Bank failures are inevitable. Post 2008 nothing was really fixed. All the “too big to fail” banks are now even bigger. Bail ins are in place because the governments don’t want to be on the hook when the inevitable happens. They know whats going on. They helped set it up. Over the last 20 years the global banks have cross invested in each other. This was to strengthen each other so that one failure could be contained. However what they have actually accomplished is a transfer of risk. Now instead of having the risk of an individual bank failure, which is always there, we now have major systemic risk. Basically if any large bank in the world implodes, (Deutsche bank anyone?), instead of the fallout being contained to that bank, those investors and that country, now the risk is nothing less than global banking annihilation. You may disagree but that IS how the system is set up now. Please, please please keep this in mind if you are a bank stock investor. I own bank shares. The growth and dividends are fantastic. But always keep in mind the actual risks out there. My finger is always on the sell trigger if I hear of problems at a major global bank.

It’s funny to see Stan the right winger cite Huffpost, the CBC and the Canadian Centre for Policy Alternatives to explain the alleged bank bailouts. Sorry Stan, but they weren’t bailouts. The mortgages purchased were not “non-performing”, and the government did end up making money on the deal. They floated bonds at 2.5% and purchased mortgages from the banks paying 4% and higher. The banks were reluctant players. A Financial Post article recently explained how much work Flaherty had to do behind the scenes to coax the banks into playing along. Work that started before the crisis even hit.

The Insured Mortgage Purchase Program did exactly what it was supposed to do – improve banks’ liquidity so they could keep lending and avoid a credit freeze. And they did. In the process, they inflated Canada’s housing bubble to epic proportions. So there were very real negative consequences. But “costing the taxpayers” wasn’t one of them.

It is interesting why a top tier bank would need capital at costs (maybe 5-6 %, maybe more, for sure above the preferred shares return) far above the interest rates on deposits (1%?). Why not just increase deposit rates or cut dividends if they need more capital (and what exactly do they need it for?)

**********************************
Stan those are good questions. And there are good answers. To begin to understand banks requires some accounting knowledge and knowledge about how banks work.

Banks are regulated and require minimum amounts of equity common share owner capital. And a minimum level of Tier 1 capital which includes any preferred share holder capital. And a higher amount of total capital which includes any bond investor capital.

Deposits are not capital at all.

It’s a long story but banks have loan assets of roughly 10 times or higher their total owner capital and roughly 15 times common equity capital. They make about a 1% net profit on loan assets but that turns into about 15% on common equity after considering leverage. Deposits are the most lucrative part of the leverage since they pay an average of roughly say 1% on deposits. Pref shares are a more expensive part of the leverage but are needed in order to be allowed to create / take in more deposits while maximising the leverage on common equity.

So the answers are: Deposits are not capital

And capital (common shares, preferred shares, bonds) are subject to regulatory minimums and must increase as the bank grows.

Cutting the dividend to increase capital works in theory but in practice would panic the markets and the share prices would fall.

These days, everyone needs to develop their own personal “unified field theory”. You can’t trust any news outlet anymore, totally biased, or totally fake. Politicians can’t be trusted either, especially Canadian ones. While I hope Freeland can cry her way into another trade deal – I just don’t want to waste any of my time trying to figure out how the hell any of what these airheads are doing is any good for anyone.

Thus, I’ve adopted a financial re-purposing of Newtons 3rd law of motion:

“for every government action I don’t like, there will be an equal and opposite reduction of taxes remitted”

So, if Trudeau goes to India and makes an ass of himself again – he’ll get less money. If Freeland blows up the NAFTA deal, I will add to their existing pain in spades. If Canadian tax dollars are given to foreign dictatorships, it’ll have to be a little less next time.

So now, I only need to determine for myself if the action was bad or not, then I can get back to my day (nearly) stress free.

the right wants a good deal that will generate prosperity … but a deal that makes Canada prosper will likely mean another term for Trudeau.

Meanwhile, the left wants no deal, which will cause the Canadian economy to stagnate, and means Trudeau will be booted out.
_____

I used to think that way too, until I realized that Canadian voters were jellyfish who could be coerced over a cliff like Lemmings – just get one to jump and the rest would follow.

Logic is out, stupid is in. Trudeau will go down as the biggest mistake in Canadian Politics ever, but I would not be surprised to see him back in power again – even with a majority.

Even if he presides over the destruction of NAFTA and implementation of Auto Tariffs, all he’d have to do is talk about how the deal was no good for Canada and huge swaths of brain-dead Canadians would understand this as a good thing, and the right decision.

You could have 10% unemployment and a 10% drop in GDP linked directly to the loss of NAFTA, and Canadians would be happy about it.

We’ve got a long ways to go – and that’s why having hard left wing federal majorities is probably the best way to get the quickest voter rethinking which actually has legs. Short term pain for long term gain.

In Vegas, saw the Trumpster tonight. Getting shit faced with fellow Deplorables. Heaven.
Can’t wait to vote in the mid terms , Yeah , California no id required to vote. Joined a democrat group. Know the enemy. Sun Tuz.
Im even getting a bus ride to the vote with free cocktails after
I love America.
______________________________________
I wouldn’t try it old man!
Is that just the whiskey talking again?
You will require ID, and just to let you know even if you have a California drivers license from the DMV there is a code with your citizenship on it that you do not know about. How do I know? I lived there longer than you. Couldn’t vote in first election and only when I received dual citizenship could I vote. They need to last four digits of your SSN to get registered. That you do not have as a TN-1 plebe.
Good luck when you hit the booth looser.

Read below old man………………………………..
Who Can Vote in California?

To register to vote in California, you must be:

A United States citizen,
A resident of California (which includes a person who was a resident of this state when they were last living within the territorial limits of the U.S. or D.C. or a citizen born outside of the U.S. or D.C., but whose parent or legal guardian was a resident of this state when the parent or legal guardian was last living within the territorial limits of the U.S. or D.C. and he or she has not previously registered to vote in any other state),
18 years of age or older on Election Day,
Not currently imprisoned or on parole for the conviction of a felony (for more information on the rights of people who have been incarcerated, please see the Secretary of State’s Voting Rights for Californians with Criminal Convictions or Detained in Jail or Prison), and
Not currently found to be mentally incompetent by a court of law.

Re NAFTA, the Americans have telecommunications and banking on the table as industries they want to send to Canada to compete. Canada’s team is saying those two industries fall under the category of “culture”. The USA sees Canadian banks operating in the USA and thinks that the USA should be able to do the same in Canada.

Culture? Yeah right, for example the “culture” of screwing customers by charging the highest fees in the world for mutual funds.

I’ve always thought it was weird that the US allowed access to their markets while tolerating being excluded from many major Canadian industries, banking, insurance, telecom just to name a few. First time I ear this is on the table but if it is (source?) i’m glad, all those cartels are ultimately bad for competitiveness and for the Canadian economy.

But Evangeline brings up a good question: “Is it possible that a big Canadian bank could fail if American banks are given free rein to open banks in Canada?” Maybe not fail, but would the shine come off our banks should a new deal compromise their oligopoly?
‘No bank will fail.’ How is that doomy? As for allowing US banks to open here and compete on an equal footing. Funny. – Garth

David Rosenberg posited today that a US recession would start within 12 months. Where would we find safety in what ETFs in a case like that or is it best to just pull your money out and leave it in cash?

Culture? Yeah right, for example the “culture” of screwing customers by charging the highest fees in the world for mutual funds.

/////////////////////////////////////////////////////////////////////

Err, apart from the funds hocked by local insurance corps, all the rest are US companies such as fidelity.

Not that I don’t agree that B(h)ell and scum Rogers should break their stranglehold, getting ATT or Verizon here won’t lead to lower prices that’s for sure. In theory it /should/ but since when does a US corp offer lower prices outside of the US?

ATT has zero footprint in say Mexico, EU elsewhere for the same reasons as here, local monopolistic regs.

Of course the banks wont fail, the public purse strings have its back. It is nothing less than a monopoly of organized and accepted crime. Free speech and independent thought on the other hand … it’s days are numbered

Forget Royal Bank, Alimentation Couche-Tard is now Canada’s largest company by revenue.

How many Canadians have heard of this company let alone would guess that it was anywhere near the largest company by revenue in Canada?

Their annual meeting was yesterday. Checking Google, I can’t find a single mention that it it is now tops in revenue. I guess that is just too boring of a story. The Globe and Mail did mention it very briefly in the Spring. I guess, yawn.

The journalists on hand instead mention that it might sell Cannabis one day.

With 87% of its sales outside of Canada, and a listing only on the Toronto stock exchange this company “imports” something important to its Canadian share owners – profits. But this goes unnoticed…

,,,”Professor Hyman Minsky once wrote “Banking is not money lending; to lend, a money lender must have money. The fundamental banking activity is accepting, that is, guaranteeing that some party is creditworthy. A bank, by accepting a debt instrument, agrees to make specified payments if the debtor will not or cannot”.

“Banking is not money lending”? Surely some mistake! Why would an economist as famous as Professor Minsky make such an outrageous sounding statement?…

,,,”Professor Hyman Minsky once wrote “Banking is not money lending; to lend, a money lender must have money. The fundamental banking activity is accepting, that is, guaranteeing that some party is creditworthy. A bank, by accepting a debt instrument, agrees to make specified payments if the debtor will not or cannot”.

“Banking is not money lending”? Surely some mistake! Why would an economist as famous as Professor Minsky make such an outrageous sounding statement?…

http://positivemoney.org/2013/06/banks-dont-lend-money-guest-post-by-michael-reiss/
—————————————————————
Minsky is making a very different point than Hudson. Hudson’s contention is that banks provide no loans to companies to enable them to grow. That is obviously false. He asserts that banks are lending only to corporate raiders. And yes, he has worked for banks, but never in a lending capacity, instead as an economist.

Minsky’s point is about the creation of money and more specifically what money is.

And it can be argued that the act of lending itself creates money and the bank doesn’t need to have any deposits to do it. By advancing the loan, the bank creates and asset for themselves (the loan) and a liability as well (the deposit of the funds into the customers account). Sri Thiruvadanthai talks about this a fair amount.

I’m Garth would have said that 2008 couldn’t happen either. Predictions are hard, especially about the future. We got about 6 times the HELOC leverage as compared to our US counterpart before their housing bust. I don’t see any big risks going forward.

Garth’s Instagram Posts

The views expressed are those of the author, Garth Turner, a Raymond James Financial Advisor, and not necessarily those of Raymond James Ltd. It is provided as a general source of information only and should not be considered to be personal investment advice or a solicitation to buy or sell securities. Investors considering any investment should consult with their Investment Advisor to ensure that it is suitable for the investor's circumstances and risk tolerance before making any investment decision. The information contained in this blog was obtained from sources believed to be reliable, however, we cannot represent that it is accurate or complete. Raymond James Ltd. is a member of the Canadian Investor Protection Fund.